resources from another dimension

Here’s something I wrote a few years ago, toward the beginning of my Austrian self-education:

The child says to the parent, “Buy me that!”

The parent replies, “No, we don’t have enough money.”

The child says, “Just get some more from the money machine!”

We smile at this suggestion because we understand both why the child assumes ATMs provide money whenever needed, and also why the child’s assumption is wrong. Children only see half the equation: they sometimes see the money coming out of a bank’s “money machine,” but rarely see what’s involved in putting the money into the bank in the first place. Mom and Dad have a better idea not only of how much work will have gone into buying the desired toy, but also (and more importantly) they will know what other purchases will be postponed or abandoned in order to buy the toy.

“We don’t have enough money,” doesn’t actually mean that there aren’t N dollars available to buy the $N toy; it means that the loss of $N of consumption elsewhere outweighs the benefits of getting the toy.

I have met people who, while recognizing the humor of the ATM story, nevertheless consider the government to be a money machine in exactly the same way the child sees the ATM. They see that the money can flow out from the government, and they see the associated benefits of that particular flow of money, but they account for neither the source of that money nor the opportunity costs — the options forgone — by any particular spending decision.

And here is the great Henry Hazlitt making the same point more succinctly:

The State is a shadowy entity that apparently gets its money out of some fourth dimension. The truth is, of course, that the government has nothing to give to anybody that it doesn’t first take from someone else.